The Department of Justice has a practice that robs taxpayers of money that should be paid into the federal treasury.
As part of the settlement of a criminal or civil case, the department will require a defendant to pay money over to a third party, rather than write a check to the federal government. The department did that in the Bank of America and Citigroup cases by requiring the banks to make “donations” such as “community development funds, legal aid organizations, and housing counseling agencies” who were not the victims of the banks’ wrongdoing.
Third-party payment requirements like those are unsound as a matter of policy. They should not be included in a plea bargain, a civil settlement, and a non-prosecution or deferred prosecution agreement unless an act of Congress expressly and specifically authorizes the government to impose any such obligation. The department is simply taking money that belongs to taxpayers and giving it to the government’s cronies.
The magnitude of the problem is clear when you flip the facts of these settlements on their head.
For instance, assume that Bank of America and Citigroup settled a lawsuit with the government, and the banks would receive money to settle the case. Then ask yourself this question: Can the lawyers for either bank tell the government to pay millions of dollars to the CEO’s or the lawyer’s favorite charity, instead of making out the check to the bank?
The answer is clear: They could not. It would be a violation of a lawyer’s fiduciary duty to his client and would be tantamount to theft.
In all likelihood, even the Justice Department would take that position. If so, if the lawyer for a bank, or even the bank’s CEO, cannot give away funds that the bank receives in a settlement, then the department should not be able to give away funds that it receives in a settlement.
Any money that the government orders a corporation to give to a private party is money that the corporation would otherwise pay into the federal treasury, where it would help underwrite the cost of running the government. The result is a giveaway of federal funds, a giveaway that burdens taxpayers by requiring them to make up for the amount given to favored recipients.
Third-party contribution requirements circumvent the constitutional process for appropriating taxpayer dollars. They allow the executive branch to perform an end run around Congress’s prerogative regarding the federal appropriations process.
Third-party contribution requirements also deny the public the opportunity to know how public funds are spent and to hold elected officials accountable for their choices.
Finally, third-party contribution requirements are rife with opportunities for political cronyism. They allow the Justice Department to pick and choose among private organizations as to which ones will receive federal funds without any guidance from Congress or any oversight by the Judiciary or Appropriations Committees in each chamber.
Third-party contribution requirements are rife with opportunities for political cronyism.
The fiduciary rules that apply to private parties should also apply to the government. Sauce for the goose should be sauce for the gander.
The House of Representatives is trying to put an end to this practice. Bravo. It is time to halt the Justice Department’s theft of taxpayer funds.
